The Toronto housing market doesn’t seem to be heading towards a hard landing, as the Toronto Real Estate Board figures released on Thursday, October 3 suggest. There were 7,411 residential transactions recorded through the TorontoMLS system in September 2013, which is an increase of 30 per cent from he 5,687 transactions reported in September 2012.
Demand for housing in Toronto is still alive and quite well despite Ottawa's efforts to tighten mortgage lending rules and cool the market. So far, after the first nine months of 2013, the total number of residential sales reported through the TorontoMLS reached 68,903. That’s just 1 per cent less than the number of homes that changed hands over the same period in 2012.
Toronto Skyline by elPadawan
Some of the increased resale housing activity still comes from prospective homebuyers who want to take advantage of their pre-approved low mortgage rates before they rise. Another factor was the weak spring season, which was dampened by bad weather. The usual peak season for sales was therefore pushed into late summer as well as into the beginning of fall. Benjamin Tal, Canadian Imperial Bank of Commerce (CIBC) economist, remarked,
People are talking about whether the market’s had a hard landing or a soft landing, but so far there’s no landing whatsoever. My sense is that activity is too strong for the liking of regulators, and maybe the government. The market is stronger than it should be at this stage of the cycle. Part of what we’re seeing now is people stealing activity from the future, out of fear of higher interest rates.
The highest increase in sales was recorded in the detached houses segment, which was up almost 34 per cent, followed by 30.9 per cent growth in townhouse sales and a 28.8 per cent surge in the condo segment. The number of semi-detached homes that traded hands in September went up by 20.4 per cent year-over-year. Dianne Usher, Toronto Real Estate Board president, noted,
It’s great news that households have found that the costs of home ownership, including mortgage payments, remain affordable. This is why the third quarter was characterized by renewed growth in home sales in the GTA. We expect to see sales up for the remainder of 2013, as the pent-up demand that resulted from stricter mortgage lending guidelines continues to be satisfied.
The Price Gap Between High-Rise and Low-Rise Homes
The average selling price for homes in the GTA this September was $533,797, representing 6.5 per cent growth on a year-over-year basis. The average selling price through the first nine months of 2013 reached $520,118, which is over 4 per cent more than through the same period in 2012.
The MLS® Home Price Index composite benchmark, which adjusts for changes in the types of houses sold, experienced 4 per cent year-over-year growth in September.
It was the strong growth in sales that helped push average prices up. Jason Mercer, TREB’s senior manager of market analysis, commented,
The price growth story in September continued to be about strong demand for low-rise home types, coupled with a short supply of listings. Even with slower price growth and month-to-month volatility in the condo apartment market, overall annual price growth has been well above the rate of inflation this year. This scenario will continue to play out through the remainder of 2013.
Average sale prices were pulled by townhouses and detached houses, which were up 9.7 per cent and 7.9 per cent, respectively. The average sale price of a detached home in the GTA was $674,027, and an average townhouse cost $405,368. Prices of semi-detached houses went up by a modest 1.5 per cent, reaching an average price of $488,749.
Toronto City Hall by Francisco Diez
On the other hand, condo prices in the GTA recorded a 1.8 per cent decline year-over-year, with prices in the city going down by 3.7 per cent and in the 905 region increasing by 2.9 per cent. The average selling price of condo apartments in the GTA for September 2013 was 342,760. Sal Guatieri, senior economist of BMO Nesbitt Burns, pointed out,
Eight years ago you could have bought a low-rise and high-rise property for the price of the former today. Land constraints have driven detached home prices higher, while smaller unit sizes have dampened condo demand.
The price gap between detached homes and condos is increasing, particularly in the City of Toronto, where condo prices experienced a decline. When we divide the Toronto housing market into low-rise and high-rise markets, we can see that over the past three years, high-rise prices remained relatively flat, with a 3 per cent increase, while low-rise prices spiked 35 per cent over the same period.